Tuesday, August 30, 2011

After wobbling, markets rise

Dow finished up 20, advancers over decliners 5-2 & NAZ gained 14. Banks had a tough day after a tough month. But the Financial Index is up 10% from its lows last week.

S&P 500 Financials Sector Index

Value	177.67
Change	-1.32 (-0.7%)

The MLP index blasted thru 350, intent on making it a floor once again, while the REIT index rose almost 1 to the 227s. Junk bond funds were mixed in what has been their worst month since the Lehman collapse almost 3 years ago. Treasuries gained. Oil rose, advancing with gasoline & heating oil as East Coast refineries worked to restart after Hurricane Irene & on signs the housing market is stabilizing. Gold had another solid gain, it may want to take out its recent highs above $1900. Its chart shows is up about 15% in Aug from buying by nervous investors in what has been a bad month for stocks.

Alerian MLP Index

Value	352.44
Change	2.35 (0.7%)

Treasury yields:

U.S. 3-month	0.010%
U.S. 2-year	0.195%
U.S. 10-year	2.176%

CLV11.NYM

Crude Oil Oct 11

88.84

1.57 (1.8%)

Click for the latest market update Below:

Photo: Yahoo

The Federal Reserve (FED) considered a range of actions to help a struggling economy at its Aug meeting, including the unprecedented step of tying the interest rate policy outlook to a specific unemployment level. Before settling on a promise to keep rates near zero until 2013, which prompted 3 dissents, FED officials noted the economic outlook had worsened significantly, arguing that the weakness seen during the first half of the year could no longer be dismissed as solely temporary. "Participants noted a deterioration in labor market conditions, slower household spending, a drop in consumer and business confidence and continued weakness in the housing sector," according to minutes from the Aug 9 meeting. A few members wanted to take even bolder action but, the minutes said, "were willing to accept the stronger forward guidance as a step in the direction of additional accommodation." At its meeting, the FED discussed a range of tools for additional monetary easing, including engaging in further asset purchases or shifting the composition of bonds on the central bank's portfolio toward longer-dated maturities. They're confused about the economic recovery like about everybody else!

A Few Fed Policy Makers Favored ‘More Substantial’ Move Aug. 9

Dollar General posted bigger-than-expected gains in Q2 sales & profit & raised the low end of its full-year forecast. Same-store sales rose 5.9%, a faster clip than the 5.4% in Q1 & the gross margin decline was much narrower than in Q1. Customers are buying an increasing proportion of lower-margin necessities as they cut back on discretionary purchases due to higher gas prices & high levels of unemployment. The weak economy is a double-edged sword. As lower-income shoppers seek low-priced food & other basic goods, a soft economy brings new customers into its stores. DG, with 9600 stores, sales rose 11.2% to $3.6B. Q2 EPS was 42¢, up from 41¢ last year. EPS was 52¢, excluding items, above forecasts of 48¢. Shoppers buying more food & basic goods rather than discretionary items pressures profitability, as those items generally carry a lower gross profits than other goods while prices paid for goods rose due to higher commodity & fuel costs. DG expects EPS of $2.22-$2.30 for its 53-week fiscal year, versus a prior forecast of $2.20-$2.30 & expects sales to rise 12-14%, up from a prior forecast of 11-13%. Same-store sales were guided to increase 4-6%, versus an earlier forecast of 3-5%. The stock is up $1.97 & has done well in 2011.

Dollar General profit risesReuters

Dollar General Corporation (DG)

Carl Icahn Offers $10.3 Billion for Clorox If Auction Fails

Photo: Bloomberg

Carl Icahn said he would backstop any auction of Clorox, a Dividend Aristocrat, with a $10.3B bid if his slate of nominees were elected to the board after the company's board unanimously rejected 2 offers from Icahn (the largest shareholder). The shares are trading $8 below the $78 per share offer, indicating investors do not see it happening either. Icahn said he would fund at least half the purchase price in cash & the rest thru bonds. The new bonds could sell at a discount to par, making the real offer price unclear. The stock rose $1.89 to $70.52 & has had gyrations with an upward bias during a rough time for the stock market

Icahn Offers $10.3B for Clorox If Auction Fails

Clorox Company (The) (CLX)

If there is any reasoning behind the gains this week, it's on hopes of more economic stimulus. Of course that is a touchy subject if it's to come from the federal gov which is looking for ways to reduce the whopper size deficits. It's uncertain what the FED might do to stimulate the economy, especially when the members were divided at the Aug meeting. The rest of the week will probably feature a lot of shloshing around on low volume, waiting for the jobs number on Fri.